Market Analysis – EURUSD
The Euro is currently witnessing multidirectional price movement due to fundamental elements of the market taking place over the last 24 hours and today throughout the European Session. Yesterday, the price of the Euro started the day strong with the EURUSD increasing in value as well as the EURX, though after increasing by over 30 pips during the first half of the day the asset quickly declined within a few hours. The decline of the asset built momentum towards the end of the European Session dropping by 71 pips at one point. Currently, the price movement has steadily increased back upwards and is trading around 1.2032, which is just over a 50% correction of yesterday’s bearish trend.
Investors are focused on the outcome of the European Central Bank’s press conference. The rates were expectedly left on the previous levels: the key rate at 0.00%, the marginal rate at 0.25%, and the deposit rate at −0.50%. Also, the European Central Bank did not begin to adjust the monetary policy and did not hint at the timing of the reduction of the bond repurchase program (PEPP). Instead, officials said the regulator will continue to buy back securities at a significantly faster pace than in the first months of this year. Now, investors await the June meeting of the ECB, hoping that the future expansion of vaccinations and a reduction in the incidence of coronavirus will still force the regulator to begin tightening monetary policy.
The monetary policy has been placed so loosely in order to support the 19 economies as they struggle with the coronavirus shock. Many European nations have been forced to return to strict lockdowns after a third wave of infections over the Easter period, and there is a lot of uncertainty lingering for the coming months.
Market players are keenly anticipating the June meeting, the next in the ECB’s calendar, as the next key moment for monetary stimulus in the eurozone. Certain individuals are hoping to see a stronger policy as economies start to reopen in June and the rate of vaccinated individuals start to rise. Though when questioned on this, President Lagarde said there hadn’t been discussions so far on a possible phasing out of stimulus, as it was “simply premature”.
Also reported in the market, EU authorities are preparing a lawsuit against the AstraZeneca company due to the shortage of drugs, which delayed the rollout of vaccinations for European citizens and caused additional damage to the economy. At the same time, Brussels is working on a contract with Pfizer and BioNTech to purchase 1,8 billion doses of their vaccine. It is assumed that it will be delivered to the EU during 2022 and 2023.
Published yesterday, data on initial jobless claims in the USA disappointed investors. The indicator fell to 547,000, while the forecast expected its growth to 617,000. Generally, the situation in the US labor market continues to improve. The rapid pace of vaccinations and financial incentives are forcing businesses to hire new employees, but the total number of workers in the country is still 8 million fewer than before the crisis. President Joe Biden yesterday announced tax breaks for businesses that will provide employees with short-term paid leave to vaccinate. This measure should stimulate a further increase in its pace and contribute to the recovery of the American economy.
Looking at the market today we can see Euro is strengthening against its main competitors including the Pound, the Yen, and the Franc. When looking at the US Dollar Currency Index on a daily chart, we can see the price movement has moved lower than the opening price for the day.